An almost weekly update of environmental news, particularly marine updates, with occasional splatters of transportation, indigenous, ideas of sustainability and sustainable development from around the world.

7.2.07

Climate Change And Oil Prices

7 Feb 2007 (TODAY)

Fuel rates could seesaw as global warming spreads

NEW YORK - Climate change, by disrupting current weather patterns, couldplay ever greater havoc with the zigzags in oil prices, such as the priceplunge seen in early January, market analysts said.

The Intergovernmental Panel on Climate Change (IPCC) - the United Nation'stop scientific authority on global warming - delivered its starkestwarning yet on global warming on Friday. It said that fossil fuelpollution would raise temperatures this century, worsen floods, droughtsand hurricanes, melt polar ice and damage the climate system for athousand years to come.

The warning cannot be ignored by businesses or the financial world, andparticularly those markets that are climate-sensitive, such as oil.

Some analysts have already pointed a finger at climate change last monthas oil prices tumbled by 18 per cent in under three weeks when unusuallyhigh temperatures in the northern hemisphere reduced demand for heatingoil.

"Assuming that the recent weather patterns are in fact caused by globalwarming to some extent, yes we've already seen the impact of it last yearon natural gas, because we have the highest inventories ever, so we hadless consumption; and this year on oil prices," said BMO Capital Marketsanalyst Bart Melek.

According to Natixis Bank analysts, if climate change lasts, and fewscientists see it as passing, it will become an all-season wild card.

Next summer, for example, with air conditioners roaring and travel seasonunder way, greater pressure should send oil prices soaring, they said in areport. In the fall, they noted, there will be concerns about major stormsand hurricanes that can disrupt supply networks, for example, in the Gulfof Mexico.

The IPCC forecast greater intensity in North Atlantic hurricane activityas water temperatures rise. Investors have already had a taste of this. In2005, when Hurricane Katrina ravaged New Orleans and other points alongthe Gulf coast, it damaged many US oil platforms and helped send oilprices surging above US$70 a barrel for the first time since the 1970s.

Erratic weather "could add to a lot of volatility because of thisfluctuation of the norms. If weather is erratic, so will be demand and sowill be prices," said Mr Melek, joking that that would be "a trader'sdream".

The greatest impact of climate change could be felt 10 to 20 years downthe line when most major energy consuming nations have moved on toalternative energy sources, said Mr James Williams of WTRG Energy. - AFP